Mr. Gaurav Jani, Research Analyst - Prabhudas Lilladher
- NIM at 4.3% for the quarter was softer due to sharp wholesale growth.
- Retail contribution may take about 4-6 quarters to reach pre-pandemic levels.
HDFCB's PAT at Rs100.6bn was a miss (PLe: Rs115.04bn), due to weaker NII and other income although opex was lower. Asset quality was stable and OTR pool is ~1.1% of loans. NII traction remained softer than loan growth due to non-retail focus. HDFCB's credit accretion in the recent past has been primarily led by wholesale and CRB, since credit standards were tightened in retail due to COVID. This has been a drag on margins. Loan mix in terms of non-retail/retail stands at 61/39 compared to 50/50 pre-pandemic. Balance sheet strength is suggested by a PCR of 70%+, contingent provisions at 71bps and a CET-1 of 16.7%. However, near term RoE (FY23 & FY24) could remain between 16-17% as commentary suggests that the positive effect on NIM that could emanate from faster retail credit offtake, may take 4-6 quarters to materialize and as rates rise, CASA share is expected to moderate. We reduce our PAT for FY23E/24E by ~6% each, owing to lower NII and other income. Hence, we cut our target multiple from 3.6x to 3.2x on Mar'24 ABV and trim our TP from Rs2,000 to Rs1,740. Retain BUY.
Earnings miss led by lower NII/other income: Loan growth was largely in-line at ~21% YoY, though NII at Rs189bn was a miss (PLe Rs203bn) due to lower NIM at 4.3% (PLe 4.6%). NIM miss was mainly led by sharp growth in wholesale and CRB leading to lower than expected yields. However, NII profile might improve as retail has started gaining traction and it may take 4-6 quarters to reflect in the loan mix. Other income was lower at Rs76.4bn mainly led by treasury loss while fee income was slightly lower. Opex at Rs101.5bn saw a positive surprise due to a beat on employee and other opex, though core PPOP at Rs164bn was a miss (PLe Rs176bn) owing to lower NII. Asset quality improved QoQ with GNPA reducing by 8bps to 1.17%. Provisions were a bit higher at Rs33bn due to contingent provisions though slippages were controlled. PAT was a miss at Rs100.6bn (PLe Rs115bn).
§ Loan growth led from Commercial & Rural Banking: CRB lending growth was up 30.4% YoY/10.1% QoQ, followed by wholesale loan growth of 17.4% YoY/11.6% QoQ. Retail loan growth was sluggish as Vehicle Finance and Card portfolio remains impacted. Retail/non-Retail mix is 39:61 compared to 50:50 in pre-pandemic. Prepayments from Corporate have reduced, CRB continues to be great opportunity and bank would continue to build market share in this segment. On deposits, franchise benefit continues to positively impact flows, especially CASA, helping in lowering funding cost. Although CASA improved to 48%, it would tend to its normal level of 40-42% as rates rise.
§ Asset quality robust: The bank reported a lower slippage ratio of 1.3% vs 1.6% in Q3FY22. GNPA declined by 8bps QoQ to 1.17% (19bps standard). Bank strengthened its contingency provisioning by Rs10bn during the quarter taking the total to Rs97bn (71bps of loans). Also, with lower slippages, credit remained steady QoQ. Restructuring declined to 1.14% of loans from 1.37% QoQ while the ultimate impact on GNPA could be 10-20 bps.
Shares of HDFC Bank Limited was last trading in BSE at Rs. 1464.85 as compared to the previous close of Rs. 1493.25. The total number of shares traded during the day was 286246 in over 12233 trades.
The stock hit an intraday high of Rs. 1501.95 and intraday low of 1462.35. The net turnover during the day was Rs. 422346685.00.